Additional taxes and levies lumped on foreign investors, along with tighter lending restrictions, are taking a toll on Australia’s apartment market, weakening demand which, if it persists, could see new developments shelved in the future.

That’s the view of Australian property developers, including billionaire Harry Triguboff, managing director of Meriton, who says higher charges on foreign buyers could see major developers leave Australia’s apartment market altogether.

“It’s not bad, it’s very bad,” Triguboff said in an interview with the Australian Financial Review (AFR). “When we start saying that stamp duty for foreign buyers should be 12% instead of 4%, that is called stupid.”

Triguboff told the AFR that foreign buyer demand started to soften more than a year ago, leading to presales prices getting “lower and lower”.

“Many of the Chinese can’t settle. So now we have to resell them –- there is another problem,” he said.

“And everyone thought that the Australian buyer would come in when the prices started coming down –- they haven’t — I knew they wouldn’t –- it wouldn’t make any sense if they did.”

Jonathan Hallinan, founder of BPM — another prominent Melbourne developer — agrees with Triguboff, suggesting that “since the [stamp duty] changes have been implemented, foreign sales have been almost non-existent.”

“I am pulling out of the residential space,” Hallinan told the AFR, adding that new supply of new apartments would “fall off a cliff” as more developers followed suit.

Iwan Sunito, CEO of Crown Group, which is currently overseeing a pipeline of $5 billion in residential development, also said higher stamp duty charges were having a negative impact.

“I don’t know what percentage [decrease in foreign demand] it would be but when you compound the tax with the current lending restrictions it doesn’t help.”

“We should be rolling out the red carpet for foreign buyers, not the red tape!”

Along with curbing foreign demand, creating risks for prices and the outlook for new apartment supply, Tim Gurner, founder of developer Gurner, said that higher charges and tighter restrictions on lending to foreign investors could risk pushing apartment prices significantly higher as new supply dries up. This would create additional housing affordability concerns for Australians looking to enter the property market.

“There is no question the banks and government are pushing away foreign investors, which in turn will have a huge effect on Australian housing affordability as supply dries up significantly and demand continues to rise,” he told the AFR.

“Its the perfect recipe for another big run on house prices.”

So four prominent Australian developers are all warning about the impact that higher charges and credit restrictions on foreign buyers are having on the Australian apartment market.

While they are all very attuned to what’s being seen on the ground, it must be remembered that they have benefited from the strong increase in property prices and demand during Australia’s latest housing boom.

One could easily argue they are simply talking their own book, placing pressure on policymakers to lessen or even reverse recent measures so those trends can continue.

So is the impact as bad as they’re portraying?

Recent data — both hard and soft — immediately raises some questions as to whether it is.

According to the latest ANZ-Property Council of Australia survey for the March quarter — released today — foreign demand doesn’t appear to be falling off a cliff, at least not yet.

Although respondents did report that the percentage of housing sales to foreigners did fall in all states aside from South Australia in the final quarter of last year, the declines were quite modest.

Here, look.

Source: ANZ

Based on self reporting by those surveyed, the percentage of properties sold to foreigners in New South Wales fell to 18.1% from 21.6% in the previous survey. In Victoria, it was even less, falling to 21% from 21.6% just three months earlier.

In Queensland — where apartment prices have been falling on the back of a strong increase in supply — the proportion fell to 13.8%, down from 15.4% and well below the 20.4% level seen a year earlier.

So while true that the proportion of sales to foreigners is falling, it still represents a significant amount, especially in New South Wales and Victoria where the vast bulk of apartment development is occurring.

From a broader perspective, and despite the concerns being portrayed by these developers, overall confidence levels in the ANZ-PCA survey held near the highest level on record.

The highest on record — it certainly doesn’t appear that others in the industry are all that concerned.

Casting further doubt as to whether diminished foreign demand is having an impact on the outlook for supply as some developers have warned, recent building approval figures from the Australian Bureau of Statistics (ABS) reveal that rather than declining, new approvals for higher density housing — such as apartments — is now increasing again, especially in Victoria.

In November, the ABS said private-sector dwelling approvals excluding houses — largely apartments — surged by 30.6% to 11,153 in seasonally adjusted terms, the largest amount since August 2016.

In Victoria alone, approvals for other residential dwellings surged to 6,359 in original terms, up 80% on the level of October and the highest level on record.

Even excluding the volatility in the ABS’ seasonally adjusted figures, approvals for high density housing are now clearly trending higher after falling for much of the past few years, pushing back towards the record levels seen in early 2016.

If weaker foreign demand is really damaging the sector, why then are approvals both elevated and moving higher?

Of course, these are approvals, not starts, but it hardly paints a picture where things are that bad that developers will walk away from the sector.

Indeed, even if foreign investor demand is weakening significantly, one only has to look at recent Australian population statistics to see that there’s no shortage of new demand coming in to take their place.